New structured product offers quarterly income plus autocall for growth
25 October 2020
Mariana and Lowes Structured Investment Centre have launched the 10:10 Income & Growth Plan, a structured product that combines the opportunity for quarterly income payments and for capital gain at maturity after three years or more.
For investors seeking a regular income stream, the product will pay 0.75% for each quarterly observation date that the underlying index, the FTSE CSDI, is above 70% of its level on the investment start date.
The product also includes an autocall strategy offering growth of 12% after three years, and 1% more (not compounded) for each further quarter year, i.e. maturity at 4.5 years pays 18%. The autocall is triggered if the FTSE CSDI is at 105% of its level at the start date from the third anniversary or at quarterly observation dates thereafter, through to its maximum duration of 10 years and one week.
Ian Lowes of Lowes Structured Investment Centre says: “I was on holiday thinking through the needs of investors struggling to achieve a decent income stream, who also want the potential for return on capital through a growth strategy, when the idea for the Plan came to me. It has taken a year to realise but I am delighted we are able now to offer it to investors as the Mariana 10:10 Income & Growth Plan.
“Not only can the Plan deliver a quarterly income of up to 3% per annum for investors for at least three years but it combines the opportunity for investors to see growth on their capital through the autocall structure, starting at 12% after three years and if the Plan does not mature at that date, growing by 1% per quarter and issuing income at 0.75% per quarter thereafter until the Plan matures (contingent on the index remaining above 70%).
“In addition, it utilises a key characteristic of the 10:10 Plans, the 10-year duration, which increases the opportunity for the product to mature with positive outcomes for investors.”
The benchmark index for the Plan is the FTSE CSDI (FTSE Custom 100 Synthetic 3.5% Fixed Dividend Index), which is closely correlated to the FTSE 100 but, Lowes says, has advantages for structured products, in that banks issuing structured products may face lower costs and risks using the CSDI as the underlying, enabling higher potential returns to be offered to structured product investors.
Lowes adds that the FTSE CSDI will be the underlying for future Mariana 10:10 Plans “and we expect it to become widely utilised as the underlying for many other structured products going forward”.
Risks factors fro the Income and Growth plan are that if at the quarterly observation date the FTSE CSDI is 30% or more below its initial level then no income payment is made for the quarter. If after 10 years the FTSE CSDI has not reached 105% at any quarterly observation date from year three and so has not matured, if it is above 70% it will return capital only; if it is below 70% at the final observation date it will return a loss to capital at a rate of 1% for every 1% the closing level is below the Initial Index Level. And capital may also be lost if the counterparty bank – Morgan Stanley International – were to become insolvent.
Lowes comments: “Based on levels at the time of writing, the market would need to fall to a position not seen since the darkest days of the financial crisis before income would be suspended and would only need to recovery to levels seen in June this year to mature positively.
“As ever, whilst a perfect outcome is not guaranteed, we believe this investment will meet expectations and is perfectly suited to the current investment climate and should be an integral part of a diversified portfolio, in particular where income is a key driver of investment planning.”
Closing Date: 11th December
ISA Transfers: 25th November
Direct Investment with cheque applications: 7th December
Investment start date: 18 December 2020
Maximum duration: 10 years one week
Minimum investment: £10,000
Counterparty: Morgan Stanley International
Tax: Individual/joint income is taxed as Savings Income and gains are taxable under Capital Gains Tax only if annual gains from all sources exceed £12,300 (based on current tax rules and reliefs).
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